Credibility of Central Bank Independence Revisited

Author/Editor:

Timo T Valila

Publication Date:

January 1, 1999

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The specific role of central bank independence in determining the overall credibility of monetary policy is addressed in this paper. It is argued that the credibility of delegating monetary policy to an independent central bank is endogenous to the credibility of the inflation target because a “conservative” inflation target may not be compatible with the fiscal policy stance. Also, lack of transparency in designing the institutional set-up is shown to be welfare-reducing.

Series:

Working Paper No. 1999/002

Subject:

Central bank autonomy Fiscal policy Inflation Inflation targeting Public sector

English

Publication Date:

January 1, 1999

ISBN/ISSN:

9781451841749/1018-5941

Stock No:

WPIEA0021999

Pages:

16

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